What Happens When Your Car Is Repossessed?

When a lender repossesses your vehicle because you are behind on payments, they typically look for ways to recoup their losses. That may mean selling your vehicle at auction or even keeping and leasing your vehicle to others.

Learn more about what happens after repossession below, including whether you will continue to owe any money and how you might get your vehicle back. We’ll also cover the power of the automatic stay and how bankruptcy might help.

If you’re struggling with your debt and aren’t sure how you can continue to make ends meet, consider reaching out to a debt defense attorney to find out what your options are for moving forward.

When Can a Lender Repossess Your Car in Colorado?

Life gets busy, and it’s easy to miss a loan payment date as the calendar whizzes by. Don’t worry: if you’re a couple of days late with your auto payment this month, the repo man won’t show up to take your vehicle.

Under Colorado law, you must be in default on the loan for at least 10 days before the lender can send you a notice. Once you receive the notice, you have 20 days to cure the default—which means bring the account current or make other arrangements with the lender. Only then can the lender begin the repossession process.

That doesn’t mean your car will get repossessed as soon as you’re 31 days past due in all cases. Each lender has its own policy on what is considered a default and when these procedures might begin. Check your loan contract to find out more about your specific loan and don’t be afraid to talk to your lender if you’re struggling to make your payment. Many banks have programs to help debtors get back on track with their loans, so if you’ve missed one payment, you may have options that don’t involve repossession.

Will You Still Owe Money if the Bank Takes Your Car?

In some cases, people simply can’t afford their vehicles anymore. Life and personal financial matters may have changed drastically since they bought the car with the loan, and they may see no way to move forward and keep the car. Some people are tempted to stop making payments and simply let the bank take the vehicle.

However, it’s important to note that this doesn’t put you in the free and clear. You may still owe money to the bank after losing the vehicle. For example, if you owe $10,000 and the bank is only able to sell your car for $7,000, you’re still on the hook for the $3,000 difference. You’ll have to pay the deficiency in addition to any fees that might be incurred during the repossession. Fees can include up to 120 days of storage for the vehicle while the lender decides what to do with it.

Redeeming Your Auto Loan

To get your vehicle back after it has been repossessed, you typically need to redeem the auto loan. This means you pay everything that is owed—the full amount of the loan plus any repossession fees, interest, and late fees. For example, say you owe $6,000 on the car and there are $500 in repossession and late fees. You would have to come up with $6,500 before the lender puts the vehicle up for sale in an auction to redeem the car and get it back.

For individuals who are struggling to make their car payments, this can be a difficult feat. However, if you are able to get the money together and redeem your auto loan, you now own the vehicle outright and don’t have to make any payments on it in the future.

Another way you can get your vehicle back after repossession is to buy it at the auction once the bank puts it up for sale. You may be able to purchase the vehicle at less than what you would pay to redeem the auto loan, depending on how desirable it is at auction. Of course, you would probably then owe the lender the difference and any fees associated with the repossession and auction.

A final option to try to get your vehicle back after a repossession is to work with the bank. The lender is under no obligation to work with you at this point, but some might agree to work out a payment plan for the past due payments and repossession costs so you can get back on track with the loan and get the car back. This is honestly much more likely before the vehicle is repossessed, however, so don’t ignore bank notices and reach out to lenders as soon as you know you may have trouble making a car payment.

Can Bankruptcy Help You Keep Your Car?

When you’re struggling overall with personal finances, you may be worried about more than a vehicle repossession. In this case, bankruptcy might be a potential option. When you file a petition of bankruptcy, an automatic stay goes into place that stops collections activities so you have a chance to go through the bankruptcy process. The automatic stay stops repossessions too, and both Chapter 7 and Chapter 13 bankruptcies include options for keeping a vehicle that you need to get to work and otherwise manage your life.

If you can’t pay your bills, you do still have options. To find out if bankruptcy might be an option for you at this time, reach out to the Holland Law Office at 970-232-3097 to find out more.